TMI Blog2018 (9) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee has rightly contended that when the peak credit has been considered entirely in the hands of Shri Chetan Gupta, there were no question of making any addition against the assessee-company. Further, Shri Chetan Gupta has not made any statement against the assessee-company, if any entries belong to the assessee-company. Nothing is brought on record in this regard. A.O. has failed to establish as to how assessee-company has incurred the expenses. The assessee-company has not debited any expenditure in the profit and loss account and also did not claim deduction of the same in its books of account. How the entries in the pen-drive were connected with the assessee-company have also not been established. It, therefore, appears that A.O. did not apply his mind to the alleged pen-drive before initiating the re assessment proceedings in the matter. Thus, there is absence of link between alleged tangible material and formation of belief. At the most, it could be inferred that the belief of the A.O. was based on mere imagination, speculation and suspicion. Therefore, it is not a fit case for initiation of reassessment proceedings under section 147/148 - Decided in favour of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As per details available on page 57 of the Annexure, there is credit of ₹ 2,21,00,788/- with particulars TRF TO P/L in the account maintained in the name of RLTRV PVT. EXP . There are debits of ₹ 2,21,00,788/- in the aforesaid account which appear to be expenses made on various heads which are apparently not entered in the books of account for the year under consideration and accordingly, not declared in the return of income. The amount of undisclosed expenditure made by the assessee is covered within the provisions of section 69C of the Income Tax Act. 1961. Therefore, I have reasons to believe that unexplained expenditure of ₹ 2,21,00,788/- is not declared fully and truly in the return of income for the A Y 2005-06 and the same has escaped from assessment and levy of tax. 4. In view above fads, I have reasons to believe that in the case of the assessee, for the AY 2005-06, a total amount of ₹ 2,21,00,788/- has escaped from assessment and taxability within the provisions of section 147 of the Income Tax Act, 1961 by reason of the failure on the part of the assessee. 2.1. In response to the notice under section 148, the assessee-company submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t addition is made because the entries contained in the pen-drive have not been entered into the books of account of the assessee-company despite the entries have no co-relation with the assessee-company. The A.O. himself was not sure as to the basis of the addition because A.O. in the reasons for reopening of the assessment has initiated the reassessment proceedings for undisclosed expenditure under section 69C of the I.T. Act. However, the A.O. made addition under section 68 on account of unexplained cash credit. The provisions of Section 69C are not applicable in this case because assessee-company has not debited nor claimed any expenditure in the P L A/c for the purpose of computing taxable income. The addition under section 68 also cannot be made-out because no entries were found in the books of account of the assessee-company. Therefore, entire addition is liable to be deleted. A perusal of the print out of the said pendrive would show that nothing concrete or definitive can be made out therefrom. This paper is unsigned and in the name of some RLTRV PVT EXP. This paper is not related to the assessee-company and has no evidentiary value to make any addition against the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that entries contained in the pendrive belong to Shri Chetan Gupta only. He has, therefore, submitted that no addition could be made in the hands of the assessee-company. He has, further submitted that the Ld. CIT(A)-23, New Delhi, in the case of the assessee-company for the A.Y. 2007-2008 vide Order dated 23.02.2016 following the Order of the Tribunal in the case of Shri Chetan Gupta held that the addition on account of details mentioned in the pendrive have been considered in the case of Shri Chetan Gupta. Therefore, no addition could be made against the assesseecompany. Similar addition has been deleted by the Ld. CIT(A). He has also relied upon the Order of ITAT F-Bench, in the case of R.L. Agencies Pvt. Ltd., New Delhi vs. DCIT, Central Circle- 12, New Delhi in ITA.No.2196/Del./2015, dated 30.07.2018 in which the Tribunal considered the pen-drive stood accepted by Shri Chetan Gupta, deleted the similar addition in their case. Learned Counsel for the Assessee submitted that it is a case of sister concern of the assessee-company. He has, therefore, submitted that once addition has been considered in the hands of Shri Chetan Gupta, therefore, no addition could be made in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... police have recovered a computer and pen-drive from the assessee. The print out from the pendrive showed that the assessee had received credit entries from various persons. In the said pen-drive, ledger accounts of various persons/parties have been mentioned. In the charge sheet filed by the police, it was clearly brought out that the entries in the pen-drive represent unaccounted income of various persons being deposited with the assessee. As such, the pen-drive represents the accounts of such unaccounted transactions which were being kept and maintained by the assessee. The peak credit of all the credit entries maintained in each and every ledger account has been worked out which comes to ₹ 43,67,62,555/-. The asserssee has however, shown salary and interest income in the return of income. These credit entries are not shown in the return of income. The AO, therefore, had reasoned to believe that income chargeable to tax has escaped assessment. The assessee in response to notice issued u/s 148 of the Act submitted before the AO that original return filed may be treated as return having been filed u/s 148 of the Act. The AO at the reassessment stage asked for the explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below and the Tribunal also accepted the same while deciding appeals of the assessee for assessment years 2002-03, 2003-04 2004-05. The said orders of the Tribunal support, affirm and approve the methodology adopted by the assessee to determine the peak credit for the respective years and accordingly, there is no course legal, factual or any other logic reason to denote from the same. It was, therefore, submitted that AO should have adopted the calculation of the peak credit as is directed by the Tribunal in earlier year. 5. The Ld. CIT (A) confirmed the reopening of the assessment and dismissed this ground of appeal of the assessee. The Ld.CIT (A) as regards the working of the peak credit noted that the Tribunal has decided the issue in earlier year and have considered the method of working of the peak credit submitted by the assessee to the AO during assessment proceedings. The working of the peak credit, telescoping and set off all the entries and set off of the opening balances have been accepted. The Ld. CIT (A) forwarded the copy of the peak credit working submitted by the assessee to AO for filing a remand report. The AO filed the remand report in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of funds as the cash available which is incorrect. The findings of the AO have been upheld by the CIT (A). Therefore, appeal of the assessee is not fully covered by decision of the ITAT. 9. Ld. DR submitted that the issue of reopening of the assessment u/s 148 of the Act is covered against the assessee by order of the Tribunal for earlier years (supra). Ld. DR referred to the statement of peak filed in the Paper Book to show that assessee has taken into consideration the expenses and interest which AO has excluded. Before the ITAT expenses were not referred, therefore, the AO may be directed to exclude the expenses while computing the peak. Set off of ₹ 46,16,387/- of AY 2003-04 is not available to assessee as it also contains the expenses. 10. On the other hand, Ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that both the issues are covered by the order of the ITAT Delhi Bench in the case of the assessee. He has submitted that the issue of peak is covered in favour of the assessee and assessee is entitled for benefit of set off of ₹ 46,16,387/- for AY 2003-04 upon which assessee had already paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and every entry without appreciating that same moneys have been reused. Such an arbitrary practice will lead to disastrous result and unthinkable additions which are neither justified nor warranted by the material on record. It has been pleaded that assessee has discharged its burden in explaining each and every aspect necessary for arriving at a fair and reasonable assessment. Lower authorities have failed to rebut the discharge of burden by the assessee in reconciling his peak credit working. Therefore the peak working as offered by the assessee deserves to be accepted. 6.16. After careful consideration of facts, circumstances and material available on record, case laws and rival contentions it will be desirable to dwell on the aspects of peak credit; telescoping, set off of entries, availability of opening balance and its effect in such print out; this is necessary for arriving at a fair estimate of the deemed income of the assessee for AY 2002-03 and 2003-04. 6.17. Such concepts are well known in the law with a rider of caution that they are question of facts and depend on case to case. Hon ble Supreme court and various other High Courts have laid down the proposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees details are again not considered objectively and some prima facie adjustments are reduced by CIT(A). 6.23. The peak credit theory and the benefit of telescoping is generally accepted as it is logical and acceptable provided there is reasonable material to show that withdrawals or repayments could have been available on the date of subsequent credit or repayment, more so, in the accounts of different persons. The fact that assessee has been held to be a fund manager for 148 persons for which the moneys are frequently withdrawn or deposited as per these case laws and facts and circumstances of this case assessee will be entitled to work out a peak credit and avail the benefits of telescoping. We may hasten to add that it is not a proposition of law but the exercise is to be undertaken on the inferences based on normal preponderance of probabilities and based on normal human conduct. The department is entitled to displace such propositions advanced by the assessee on cogent reasons and not by summary rejection of the explanation. In the next para we will be dealing with various case laws right upto Hon ble Supreme Court where this factual preposition has been upheld subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given as we have quashed the reassessment for AY 2001-02, therefore, the opening figure flowing from the quashed reassessment cannot be verified. Subject to these observations the peak credit as worked out by the assessee at ₹ 36,89,310/- is held as undisclosed income for this year. ( iii) For A.Y. 2003-04: On the same methodology the peak credit worked out by the assessee at ₹ 46,16,387/- is held to be the peak credit for this year. However, this peak credit is to be telescoped with the income of AY 2002-03 as the same was available with the assessee for utilization. Consequently, the taxable income for A.Y. 2003-04 is worked out as under: ( i) Peak credit for A.Y. 2003-04 ₹ 46,16,387/- ( ii) Less: Peak credit for AY 2002-03 ₹ 36,89,310/- Taxable income for AY 2003-04 ₹ 9,27,077/- 7. Thus, the undisclosed income to be included in the assessee s income is determined at ₹ 36,89,310/- for A.Y. 2002-03 and ₹ 9,27,077/- for A.Y. 2003-04. These grounds are accordingly partly allowed. 8. Apropos the remaining ground for AY 2002-03 in respect of addition of ₹ 9,21.200/- being alleged unaccounted payment of US ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival contention and gone through the record carefully. Both the Id. Representative have agreed that issue regarding reopening of the assessment by issuance of a notice u/s 148 has been decided against the assessee in AYs 2002-03 and 2003-04, similar circumstances are available in this year, hence, ground no. 4 raised in the present appeal is to be rejected. Similarly it has been agreed that the entries found in the pen-drive is admissible evidence against the assessee upon whom income of the assessee can be determined. Thus ground no. 2 raised by the assessee in the present appeal is also rejected. The following observations of the Tribunal in this connection are worth to note : AYs 2002-03 03-04 : 6.9. In these two assessment years the only challenge to jurisdiction to reassessment on the only ground about there being no live nexus between the reasons recorded and material available on record has been already dismissed by us. Consequently we proceed to decide the merits of the additions. 6.10. Reverting to the merits of the addition, department has consistently held that assessee manages wealth for other 148 persons. In this behalf some names of parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed in any earlier assessment year which is opening balance of the current AY is to be excluded. In the present AY the income of AY 2003-04 determined at ₹ 92,7,077/- is to be excluded from the peak credit because this amount was available to the assessee on the first day of the accounting year. The Tribunal has made discussion with regard to this issue from Paragraph No. 6.13 which read as under: 6.13. We have heard both the parties on these issues at length most of the arguments are contained in the written submissions filed before lower authorities, which are mentioned above in brief From AO's remand reports and observations contained in the orders Id. AO and CIT(A), the details furnished by assessee are as under: ( i) Assessee filed details about each and every entry on day to day basis, these details are placed on paper book of respective year. ( ii) From the details a summary of mistakes, opening balances (debit or credit as the case may be), contra entries etc is furnished to work out the correct amount of credits emerging from the print outs. ( iii) These details are further supported by working of peak credit for each year from, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever no inference are drawn by authorities below. Therefore, we leave this issue here. More so they become third parties to the proceedings and any observations are undesirable and may impinge on principles of natural justice. The departmental theory of assessee being a fund manager for others is supported by the fact that assessee filed complete day to day details and entry by entry details of contents of print outs available with the department. They all are part of the paper books. They were submitted before Assessing officer and CIT(A). Remand report was submitted by AO on CIT(A) s initiative. 6.19. From the explanation of the entries and departmental theory, it emerges that assessee was working as the fund manger or administrator for others. While dealing with the issue this fact is to be kept in reckoning. 6.20. Presumption u/s 292C will not be applicable in this case as admittedly there was no search proceedings under income tax act on the assessee. A statutory presumption can be raised against assessee when the prescription of law warrants it. In the absence of enabling statutory provision such presumption can not be propped up against assessee. Since there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has discharged it s onus in explaining these entries by filing the details before AO, CIT(A) and in remand proceedings. Assessee has pushed the ball in the court of department by demonstrating from the details of entries that he manages the funds for others. In the course thereof he requests for necessary working of peak credit, correction of mistakes, contra entries and considering the claims of available opening balances. The claim of opening balances is made as the data recovered pertains to three years and assessees fund managing activities span to three years. Despite assessees diligence in filing all the details the authorities below fail to consider the assessee's objections and workings. In our considered view the facts and circumstances of the case and departmental theory warrant application of peak theory, telescoping, correction of mistakes and taking cognizance of journal/contra entries. In our view ratio of decisions in the cases of- Anantharam Veerasinghaiah Co. (supra); K.S.M. Guruswamy Nadar Sons (supra); Singhal Industrial Corpn. (supra); Kantilal Bros, (supra); Sanjay Kumar Jain (supra); Ishwardass Mutha (supra), support the assessee s case for peak c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s examine Mr. Young. This clearly violates the principles of natural justice embodied in the maxim audi alteram partem. We find merit in the argument of ld. Counsel. The impugned addition cannot be made in the hands of the assessee unless proper opportunity to defend himself against the allegation including the cross-examination of Mr. Young and the result of proceedings before the E.D. authorities are to be considered. This ground is set side restored back to the file of assessing officer to decide the same afresh in accordance with law. 8. Respectfully following the order of the Coordinate Bench in the assessee s own case, where assessment was reopened on the similar reasons and same material i.e. credit entries pertaining to those years have been considered, we are of view that there is no disparity on facts, and, therefore, appeal of assessee deserve to be allowed for statistical purposes, we accordingly allow the appeal of assessee and direct the Ld. AO to verify the accounts and worked out the peak credit in accordance with the working made by the Tribunal in AY 2002-03 and 2003-04. 13.1. The assessee has filed statement of peak in the Paper Book from pages 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment u/s 148 of the Act. Therefore, these grounds of appeal of the assessee are dismissed. 15. Considering the above discussion and following the reasons for decisions of ITAT in the case of the same assessee for assessment years 2001-02 to 2004-05, we set aside the orders of the authorities below and direct the AO to make an addition of ₹ 1,36,42,861/- on account of peak credit. 16. In the result, the appeal of the assessee is partly allowed and Departmental appeal is dismissed. 7.1. In this Order, the entire facts have been considered which shows that the Department has considered the peak credit of all the credit entries maintained in each and every ledger account at ₹ 43,67,62,555/-. According to the Department, the pen-drive represents the accounts of such unaccounted transactions which were being kept and maintained by Shri Chetan Gupta. The Tribunal in earlier Orders decided the issue partly in favour of Shri Chetan Gupta and reduced the working of the peak credit, which is reproduced in the above Order and following the Order of the Tribunal in the case of Shri Chetan Gupta for earlier years, it was observed that the print-out from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-company have been mentioned because it is mentioned as RLTRV PVT EXP . The reasons for reopening of the assessment did not refer to any material to connect the assessee-company with escapement of income or incurring any unaccounted expenses. The A.O. did not verify the details contained in the pen-drive. The A.O. has initiated the re-assessment proceedings because assessee-company has incurred unaccounted expenditure under section 69C of the I.T. Act. But, later on, did not make any addition under section 69C of the I.T. Act. The A.O. has failed to establish as to how assessee-company has incurred the expenses. The assessee-company has not debited any expenditure in the profit and loss account and also did not claim deduction of the same in its books of account. How the entries in the pen-drive were connected with the assessee-company have also not been established. It, therefore, appears that A.O. did not apply his mind to the alleged pen-drive before initiating the re assessment proceedings in the matter. Thus, there is absence of link between alleged tangible material and formation of belief. At the most, it could be inferred that the belief of the A.O. was based on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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